Buying a primary residence in Avon just became a little more affordable

The town of Avon is trying to open the door to home ownership a little bit wider. With new updates, the ceiling has been raised for the upper limit on home purchase prices that are eligible for its real estate transfer tax exemption, and the dollar amount included in the exemptions.

The Avon Town Council passed the updates to the real estate transfer tax exemption into law in a unanimous vote during its meeting on Tuesday, July 9.

Avon collects a 2% real estate transfer tax on most real estate transactions within the town, with funds going to the town’s Capital Improvement Fund. Avon’s real estate transfer tax exemption, initially adopted in 1989, is designed to make it a little easier for those purchasing their primary residence in the town by cutting down on how much of the home price is taxed.

The exemption is available to those purchasing a primary residence in Avon, including those already living in Eagle County but looking to upsize or downsize into a new home.

By the numbers

Chase Simmons, Avon’s financial analyst, presented updated numbers based on feedback received from council during two previous discussions on the topic.

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“I think we’ve pretty much all agreed that we want to increase these numbers. Now we’re just trying to decide what the right increase is,” Simmons said.

Avon’s real estate transfer tax exemption was last updated in 2019, with exemption amount caps set at $160,000 and $240,000.

According to the rules of the exemption, the first designated amount of a home’s purchase price — formerly $160,000 and $240,000, for the three categories of the exemption — is exempt from the 2% real estate transfer tax.

With the updates, the formerly $160,000 eligible for exemption will increase to $500,000, and the $240,000 eligible for exemption will more than triple to $750,000. Calculating the results in dollars of the 2% exemptions comes out to savings of $10,000 and $15,000, respectively.

The maximum price of a home that is eligible for the $750,000 exemption (formerly $240,000) will also be increased, from $700,000 to $1.4 million.

Had these increases been implemented in 2020, they would have led to an additional loss of $530,000 in revenue for the town over four years, from a real estate transfer tax budget of over $25 million. In other words, “not a huge impact to the bottom line,” Simmons said.

Pushing the envelope at prior discussions

The council saw the first version of the updated real estate transfer tax exemption in May. At the time, Rich Carroll, council member, suggested that town staff create a system for the proposed dollar amounts for the exemptions, and a plan for regularly revisiting the numbers.

When the proposal returned to council on June 11, council members encouraged town staff to increase the exemption dollar amounts to match the already high, and constantly increasing, price of real estate in Avon.

During the same meeting, Town Manager Eric Heil proposed including the suggestion to regularly revisit the exemption in the town’s financial policies section, which is read over when the budget was reviewed every year. While Heil suggested a three-year revisiting policy, council members proposed reviewing the exemption every two years.

Making the exemption increase permanent

Due to Tax Payor Bill of Rights (TABOR) rules that banned any new or increased real estate transfer tax beginning in 1992, any increase of the exemption made by the council is permanent.

“If we increase this, we really can’t go down, if there’s a recession or something hits and home prices take a nosedive, this is what we have,” Carroll said.

Despite the possibility of future financial climate fluctuations, Carroll spoke in support of the proposed updates.

“All I know is, I’ve been coming to Vail since I was 10 years old, which is a long, long time ago. Over that time, prices have gone up a lot,” Carroll said. “I’m comfortable with these numbers. I think it’s the right thing to do.”

While Carroll offered his fellow council members the opportunity to dissent, many joined him in voicing support for the increased exemption rates, and all seven voted in favor.

Following the vote, Amy Phillips, mayor of Avon, issued an invitation to those who might look to buy a home in Avon.

“We darn near tripled our exemption values in honor of how much we value our residents and potential residents, so everybody come back and move back to Avon,” Phillips said.